Derek Pain: No Pain, No Gain

On the Plus side, Mears leads way with dual listing
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The Independent Online

Mears, the support services group that joined the No Pain, No Gain portfolio in March, has achieved a significant first by listing its shares on both the London Stock Exchange's main market and Plus, the upstart trading platform that is becoming an increasingly important part of the investment scene.

Until this week, its shares were traded on AIM, the LSE's junior market, with a secondary presence on Plus. With a capitalisation of £200m, it was felt elevation from AIM to full listing would create more interest in the shares and enhance the group's profile. But chairman Bob Holt was reluctant to cut the connection with Plus. After all, what is still regarded as a fringe market has accounted for some 10 per cent of Mears' share trading this year. On the first day of the dual dealing, Plus volume was 95,000 compared to 378,000 on the main market. Closing mid-prices were different with Plus at 296p against the LSE's 290p.

I believe more companies will be enticed by the dual-listing idea. For years, the LSE enjoyed a near monopoly. But the times they are a-changin'. The growing strength of Plus is not the only threat it faces.

Within the next year the powerful institution-backed Turquoise trading facility is likely to materialise, and on the small-cap front ShareMark (part of AIM and Plus-traded The Share Centre) and the JP Jenkins unquoted market (run by AIM-traded IAF) are already established.

Still it is Plus, formerly known as Ofex, that has so far emerged as the leading domestic challenger to the LSE. Make no mistake, it is still a hugely one-sided contest, with the LSE dwarfing the little upstart. Regulatory changes last year were designed to encourage more competition in the share trading business and Plus is taking advantage of the new climate.

I understand that it will soon welcome a major new addition that may solo on Plus or, like Mears, embrace a dual listing.

I am not convinced that the new, more competitive trading environment will benefit the small investor. Dealing costs may be reduced for the share-trading community but I doubt the reductions will filter through to those undertaking a modest deal. On most fronts, charges are increasing. I have commented many times on the City's near-contempt for the private investor, particularly those who want to retain paper share certificates. In some cases they have to pay dearly for the paper privilege.

I am also unhappy about the way some companies seek to switch shareholders to online communications. The investor wishing to retain the right to receive documents by post has to make an application. Surely those who want to change and embrace the internet should be required to endure the effort?

A few years ago, the still loss-making Plus appeared to be in deep trouble. New management was drafted in and a rescue cash-call, backed by a number of City stockbrokers, undertaken. Simon Brickles became chief executive. Ironically, he is a former head of AIM. Subsequently, a cash top-up was required.

Shares of both the LSE and Plus are well below their peaks. The LSE, as I write, is 834.5p against a near 1900p high and Plus is 12.25p compared with 38p. Real and imagined take over action inflated them with the LSE surviving a US assault and Plus getting caught in the American bidding slipstream.

The performance of the two shares is, however, an indication of the distress afflicting the investment world. Footsie is, in effect, an index of two halves. It would be much lower if it were shorn of high-flying mining and oil stocks. The LSE and Plus have been caught in the turmoil that has devastated such stock market sectors as banking, building and retailing.

Mears has experienced an active time since joining the portfolio. Profits this year should top £20m against £15.5m. Indeed at this month's shareholders' meeting, it was made clear that the group's performance was on target and new contracts were being obtained. In recent months, its social housing division has won deals worth nearly £140m and the home care side has attracted assignments valued at £4m annually. Few businesses are recession proof, but as I said when recruiting Mears it looks a good bet to weather the expected economic storms.

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